Fitting the crime?…

Recently, The Economisttook a look at the fines being levied against corporations found guilty of crimes. Their assessment was rather bleak:

The economics of crime prevention starts with a depressing assumption: executives simply weigh up all their options, including the illegal ones. Given a risk-free opportunity to mis-sell a product, or form a cartel, they will grab it. Most businesspeople are not this calculating, of course, but the assumption of harsh rationality is a useful way to work out how to deter rule-breakers.

In an influential 1968 paper on the economics of crime, Gary Becker of the University of Chicago set out a framework in which criminals weigh up the expected costs and benefits of breaking the law. The expected cost of lawless behaviour is the product of two things: the chance of being caught and the severity of the punishment if caught*…

We’ve gathered and visualized the biggest corporate fines of the last seven years, not just as raw amounts, but also as a percentage of each company’s profits. That way you can see for yourself if the punishment was painful or puny…

See the full graphic (full size) here, and see the underlying data here.

*Becker had created the model as a framework for considering appropriately-discouraging penalties for malfeasance. He was horrified later to learn that it was being taught by business school colleagues as a decision aid.

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As we contemplate crime and punishment, we might recall that it was on this date in 1950 that the first television show with a recorded “laugh track” (The Harry McCune Show) aired in the U.S.